Former Sears employees worry about lost severance, possible reduced pension

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Company undergoing restructuring says it is 'not able to make payments to certain creditors'

Sophia Harris - CBC News

July 06, 2017

Sue Earl working in the catalogue department at Sears in Cobourg, Ont. The now laid-off worker recently lost her severance. (Sue Earl)

Sue Earl is still reeling from news that Sears has cut off her severance payments. She says she stands to lose upwards of $20,000.

"I feel robbed," says Earl, who did everything from work in the children's department to handle catalogue orders during her 38-year career at Sears.

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"It's another slap in the face," adds the 64-year-old. "Especially when they reach out after you've left and snatch that money back from you."

'We're mad as hell.'- Sue Earl

Earl was laid off when the Sears store where she worked, in Cobourg, Ont., shut down in March — three months before the department store chain announced it would close 59 stores and lay off 2,900 staff as part of a court-supervised restructuring process. When those workers lose their jobs, they won't receive severance.

On the day it filed for bankruptcy protection, Sears also informed previously laid-off workers like Earl it was axing their severance payments.

"We're mad as hell," says Earl, who has kept in touch with fellow ex-employees. "We've supported Sears with positive attitudes, and this is how we're treated."

Pensions in peril

Earl also fears losing thousands of dollars from her pension as part of the restructuring process. "I just feel helpless," she says.

Sears has a court hearing next week where the company will request permission to halt both its retiree benefit payments along with special payments it has made for some time to top up the underfunded pension fund.

Many of Sears' 16,000 retirees fear if the company is allowed to stop making pension contribtions, they will receive reduced pensions. They also don't like the idea of losing their medical, dental and life insurance benefits.

Joseph Moczulski, of St. Thomas, Ont., fears he could lose his Sears retiree benefits and a portion of his pension. (Joseph Moczulski )

"We don't have any rights under this court protection," says Joseph Moczulski, who worked for Sears as a long-haul truck driver for more than 35 years before retiring in 2004.

"It will be a hardship," says the St. Thomas, Ont. resident of the possibility of losing his medical benefits. Both Moczulski and his wife are diabetics.

"We were promised that from the company," says the 73-year-old. "They don't care about the years we put in."

Employees at back of line

Sears Canada told CBC News that deep financial troubles left the iconic retailer with no choice but to seek court protection from its creditors while it restructures. As part of the court proceedings, Sears said it's not able to make payments to a number of stakeholders, including laid-off employees owed severance.

As far as retiree benefits and pensions are concerned, Sears contends it's too early to predict what will happen and claims employee pension payments may not be compromised.

The retailer also said ex-employees who feel they're entitled to more compensation can make a claim as part of the bankruptcy proceedings.

But for most, that could be a futile endeavor.

It's unlikely employees will recover their losses, says Toronto labour lawyer Lior Samfiru. That's because when compensation is doled out in these situations, secured creditors like banks get priority.

Sears Canada said that, as part of court proceedings, it is 'not able to make payments to certain creditors, including severance payments.' (Colleen Connors/CBC)

"Whenever a company is under creditor protection, employees are at the back of the line," says Samfiru, with Samfiru Tumarkin LLP in Toronto. "If it yields something — and I highly doubt that it would — it would be small, small pennies on the dollar."

He adds that what the retailer is doing is perfectly legal. "It's easy to demonize Sears here, but at the end of the day, Sears is acting in accordance with our bankruptcy laws."

'Disgusting behaviour'

While it's following the letter of the law, Earl believes Sears cutting off payments to workers could hurt the department store's image.

"I think Sears is shooting themselves in the foot," says the former employee.

Even store customers have complained on the retailer's Facebook page about the elimination of workers' severance.

"Canadians won't stand for that. Just as well to close up all the stores when you take that stance," posted one person.

"Disgusting behaviour by a shell of a once great company," commented another customer.

Moczulski agrees Sears was a good company. "They'd do anything to keep us happy," he says about working for the retailer. "You just wouldn't believe how fantastic it was."

And that makes it all the more difficult for the retiree to witness Sears' downfall, which could end up costing him as well.

"I'm saddened about it, about how a company so great went downhill so fast," he says.

ABOUT THE AUTHOR

Sophia HarrisBusiness reporter sophia.harris@cbc.ca

Sophia Harris has worked as a CBC video journalist across the country, covering everything from the start of the annual lobster fishery in Yarmouth, N.S., to farming in Saskatchewan. She now has found a good home at the business unit in Toronto where she produces for national TV news and writes and shoots and edits video for CBC.ca. Twitter: @sophiaharrisCBC